The Cash For Clunkers program has been a hot topic in the media as well as with satellite radio investors. The program was implemented to spur sales in the auto channel, while at the same time making the American roads a little bit greener. Some New York dealers aren’t seeing enough of the real green (money) though, and have opted out of the program.
It has been reported that hundreds of New York dealers have already withdrawn from the program which thus far has sold 435,102 vehicles with rebate claims totalling $1.8 billion. According to the Greater New York Automobile Dealers Association about half its 425 members have left the Cash For Clunkers program because they cannot afford to offer more rebates, and payment on rebates already given are as yet not honored by the government.
As SiriusBuzz readers are aware, the Cash For Clunkers program offers up to $4,500 in rebates for consumers who trade in vehicles getting 18 mpg or less for a more fuel-efficient car or truck. The issue here is that dealers are paying the rebates out of pocket and having to wait to be reimbursed by the government. As with anything that involves the government, the process is tedious and slow moving. Current estimates for the New York group are that only 2% of the requested rebates have been paid out so far by the government. Essentially, the dealerships are fronting the money, have to destroy the “clunker”, and then have to wait what seems an eternity to get their reimbursement.
According to Mark Schienberg, the group’s president, “…it’s in the hands of this enormous bureaucracy and regulatory agency. If they don’t get out of their own way, this program is going to be a huge failure.”
The program has spurred car sales and shows potential to work, but the money needs to flow quickly, and this simply is not happening. Dealerships love to move cars off of the lot, but they also need cash to order new inventory. Simply stated, the dealers are finding themselves in a cash crunch which they can not afford to expand upon.
Whether other dealerships in other areas are facing the same hurdles is unknown.
Position – Long Sirius XM Radio